Booming used car market begins to soften, according to re-marketing industry

The months of strong performance in the used car re-marketing sector appear to be coming to end as the market begins to soften at the end of 2020.

While October remained a strong month for conversions and prices, November’s performance shows a drop in demand and it’s expected to continue into December.

Aston Barclay reported that Q4 is already seeing the market return to some sort of normality and said predicting demand and prices at each sale is becoming more difficult.

It stated that fleet vendors in particular will have to accept that assets are depreciating again.

“Many franchised dealers will be replacing sold stock during lockdown 2.0, something which didn’t happen during lockdown 1.0, as only independents were buying cars,” explained Martin Potter, Aston Barclay’s managing director – customer.

“Overall, we feel prices will remain healthy into 2021 as new car waiting times increase forcing ex-business and personal leasing contracts to be extended well into 2021. Repossessions are also now not likely to reach the market until Q2 which will help keep overall used stock volumes under control and prices steady during the first half of the year.”

BCA recorded average used car values of £8,152 in October, down slightly on the strong performance reported in September. Conversion rates remained high, typically exceeding 80% across the BCA online sales programme during October, with more than 5,000 bidders logging in most sale days across the BCA programme.  Average daily sale entry remained strong with 6,000 - 7,000 units being offered daily during the month.

BCA COO UK Remarketing Stuart Pearson said “October is typically the time of year when we start to see a shift in demand, and there was a feeling throughout the month that trading was moving towards a more seasonal pattern.”

“After the pent- up demand seen over the previous five months, it was not unexpected to see the market start to gravitate towards more seasonal behaviour.  However, with the onset of Lockdown 2.0, we could see some short-term volatility and would strongly encourage our customers to use the most up to date decision intelligence as the market moves over coming weeks.”

Used car sales in the UK grew by 5.7% in October, aided by a 7.4% month-on-month growth in stock levels, according to the latest Indicata market insights report.

However, just as more used stock has been coming into the market and dealers have been filling their forecourts again lockdown 2.0 has immediately shut franchised dealer showrooms and slowed consumer demand.

As Covid infection levels rise the current used car market dynamic of short supply and rising prices is coming to an end.

Jon Mitchell, Indicata group sales director, said: “The supply shortage has contributed to higher prices at a time when traditionally the used car market is slowing down. As supply improves, we are starting to see that trend reverse with prices softening.

“With Lockdown 2.0 firmly in place for November limiting the market to online sales, and December typically a slow used car month, dealers should be prepared to manage an overstocking issue on the back of reduced demand.”

The used car market is expected to make a big come back in January, however, after pent-up demand from the November lockdown 2.0 and December’s seasonal Christmas slowdown.

That’s the view of Shoreham Vehicle Auctions managing director Alex Wright who predicts a used car market bounce back in January 2021 that will mirror June 2020 when the market came out of its first lockdown.

Wright believes consumer demand will kick in between Christmas and New Year when motorists invest in upgrading their car rather than booking a family holiday.